Wednesday, January 12, 2011

Peter Schiff in Toronto

Last night I had the luxury of seeing Peter Schiff speak in Toronto. His Toronto branch of Euro Pacific Capital has opened and the event was geared toward interested investors and potential clients. Just like going to see a band live in concert, I went to see Peter Schiff give pretty much the same speech he always does:

The United States government has made things worse, there's a depression coming, possibly hyperinflation and the future of the global economy lay in the Far East.

He talked about Canada here and there, but nothing about our own credit bubble. Schiff's knowledge on Canada tends just to be about our relationship to the US. Questions were moderated and filtered through the Canadian Euro Pac brokers, who kept the questions away from the dangers of the Canadian economy.

This is understandable considering that the entire event was geared toward promoting the Euro Pac brand. Obviously, you can't attract Canadian investors by telling them that their country has fundamental problems, but Schiff did mention on BNN earlier in the day that all countries are feeling the effects of low interest rates, and Canada is not immune to this.

So what were Peter Schiff's views on Canada? Mostly good, but it all depends on how our government acts, something Schiff acknowledged.

As the US situation deteriorates, Canada is aimed to benefit from cheap imports from the US, a brain drain of skilled US citizens looking for better opportunities up north and better purchasing power as a lot of the money flowing away from the US will flood into the Canadian dollar.

Of course, this can be offset by the State continuing to “free” trade with the US despite the clear disadvantages and our insane central bank keeping the purchasing power of our dollar lower or at par with Federal Reserve Notes. In this case we could follow the US right into hyperinflation. But even if this isn't the case, increasing State power could offset the new immigrants' ambition for start businesses and create jobs.

On the plus side, if all goes well and Canada takes a free-market approach, then Canadians could be buying up real estate all over the United States. Schiff joked that teenagers could buy Florida with their weekly allowance. He compared the future of the USA to a poor Caribbean country. None of the residents of these poor island tourist-economies live on the beach, they live in the poverty stricken cities and countrysides. Someday the US coast lines may contain all the tourists and rich real estate owners while everyone else lives inland.Schiff acknowledged that Canada is an exporter nation, and despite mainstream economists and bankers who champion a weak currency as beneficial for individual Canadians, Schiff pointed out that a stronger currency, along with our resources, will improve Canada's balance of payments. Of course, this also depends on who we trade with. Schiff favours the East, currently our political establishment favours the Americans.

All in all Peter likes the Canadian dollar, but warns that all currency is fiat and ultimately relies on a confidence game. The Canadian dollar can tank just as easily as the Americans, but so far, according to Schiff, it's looking good. Ultimately though, only gold is money. Schiff was bullish on silver as well.

Other than the usual investment recommendations, Peter warned against government bonds. Obviously, US Bonds are suicidal, but if one does decide to buy Canadian Bonds make sure they're not long-term and have a maturity of 2-3 years. Schiff favours equities over bonds, but like any good libertarian, leaves the decision up to individual preference. Schiff considers Canada a “safe haven” and didn't mention a single word about our banking sector.

Despite ignoring the credit bubble, I thought it was a good speech. Definitely worth the trip to Toronto. I met Peter Schiff, shook his hand, had my free copy of How An Economy Grows and Why it Crashes signed. Talked to a guy beside me as we waited for the show to start. He's more or less in the same boat as me – trying to warn people about the coming depression and being looked at like a kook. It's good to know there are other people out there with some economic logic. In Canada it's a rare event when two Canadian strangers can discuss the absurdity of State-run health-care or housing bubbles without resorting to the argument that “it's different here.”